BevCanna Announces Definitive Agreement to Acquire Embark Health Inc.

By Louise Sommerfeld On Sep 20, 2021

Acquisition of solventless cannabis extraction and enhanced delivery technology bolsters the company’s beverage portfolio with valuable IP, adding four innovative brands in the adult-use cannabis market and $17M in assets to the balance sheet

Emerging leader in innovative health and wellness beverages and products, BevCanna Enterprises Inc.(CNSX: BEV, OTCMKTS: BVNNF) announces today that it has entered into a definitive agreement dated September 19, 2021 (the “Agreement”) to acquire Embark Health Inc. (“Embark”).

Embark has extensive manufacturing and intellectual property (“IP”) assets related to high-end solventless cannabis extracts, such as bubble hash, traditional pressed hash, rosin, dry sift and its innovative and best-selling Hazel Hash Stick. Embark is also equipped to produce a range of cannabis concentrates, liquid and powder beverage mixes, topicals and edible products. With four adult-use brands, across all three cannabis 2.0 product categories, in the Canadian marketplace that feature the solventless and enhanced delivery, Embark boasts a complete adult-use product offering that includes beverages, topicals, solventless extracts and hash. Embark is also the majority owner of ProteinQuest, which applies Embark’s innovative and proprietary technology to the protein-enhanced and functional food industries with initial commercial products utilizing hemp seed, positioning it for further growth in the health and wellness industry.

The acquisition of Embark significantly accelerates BevCanna’s evolution into a diversified health and wellness company. Our unique and diverse portfolio will now include an even broader range of adult-use and wellness channels and innovative product categories. The acquisition will unlock significant value for both organizations and brings together two exceptionally experienced teams, forming one of the most diverse and innovative health and wellness companies in the industry.
John Campbell, CFO of BevCanna

Deal Highlights:

The acquisition is accretive for BevCanna, and the combined entity will have over $100M in assets on the balance sheet.
Adds a unique range of valuable brands, across all three cannabis 2.0 categories, that enables BevCanna to sell differentiated and complementary adult-use and wellness products.
Adds a state-of-the-art production facility in Delta, BC, with ~$17M¹in tangible & intangible assets including direct ownership of $11M¹in equipment.
Deemed price represents a 33% premium to the volume weighted average trading price of the BevCanna Shares on the CSE for the five trading days preceding the date of this announcement.
Gross revenue totaled $790,000 and approximately 65% gross margin for the last three months of commercial production.
Bolsters beverage portfolio with the addition of proprietary nanotechnology and rapid onset delivery technology for beverage, topical and edible products, allowing BevCanna to vertically integrate its supply for select in-house and white-label clients.
Adds innovative solventless extraction technology that enables BevCanna to offer hash, bubble hash, live rosin and other highly sought-after adult-use cannabis products.
Adds world class management and operations team members who are pioneers in cannabis, extraction, and drug delivery technology, including:
- Bruce Dawson-Scully, Founder and Chief Executive Officer of WeedMD (TSXV:ENTG)
- Marcus “Bubbleman” Richardson, best known for being the founding pioneer of bubble hash
- Michael West, global extraction expert who has developed, designed, and built over a dozen world class extraction facilities for companies such as Cresco Labs (CSE:CL)
- Curtis Leifso, expert in enhanced bioavailability drug delivery technology
Diversifies the business between cannabis and wellness with an emphasis on cutting-edge technology and high growth product categories.
Enables cross-utilization of existing licenses, including Health Canada issued adult-use sales license that gives BevCanna the ability to sell its products directly to provincial distribution boards across Canada. Its Health Canada-issued medical sales license allows for expanded distribution of direct-to-customer. A research and development sensory license also enables rapid product development with its existing and future white-label industry partners.
Exposure to the protein-enhanced and functional food industry with majority ownership of ProteinQuest, which specializes in producing a wide range of proprietary hemp seed derived protein powders, cooking oils, and beverages.

Embark Facilities:

The acquisition of Embark also includes two world-class production facilities that together bring over $17M¹ in tangible and intangible assets, including $11M¹ in state-of-the-art equipment and nanotechnology IP.

Embark Delta is a 40,000 sq. ft. facility, purpose-built to GMP standard. Embark Delta is federally licensed and is actively producing concentrates, beverage mixes and topicals. It produces solventless concentrates for B2B contract manufacturing supply agreements and white-label services, as well as Embark-branded products for sale to provincial boards for adult-use recreational markets and medical markets. Embark Delta is centrally located in lower mainland British Columbia and provides turn-key and scalable growth capacity through reduced outsourced cannabis secured/licensed storage, shipping fees, manufacturing, packaging, and labelling.
EmbarkNano is a 4,600 sq. ft. facility located in Calgary, Alberta. Dedicated to the production of nano precursors, as well as delivery technology research and development on nano products, EmbarkNano is focused on manufacturing finished products from the “non-controlled” precursors produced in Calgary. EmbarkNano is not licensed under Cannabis Regulations and there is no plan at this time to license this facility.

Embark Brands

Distilled and Infused – Liquid and powder beverage mixes
One of the most flexible and accessible infused beverage options, Embark’s Distilled and Infused beverage mixes are offered in liquid and powder formats, with a powder line to be launched in early 2022. The underlying technology can be applied to various health and wellness products.
The Hazel Hash Stick – Disruptive concentrate product
Embark holds the exclusive and worldwide license to this product, which is the first-of-its-kind in the Canadian market. Originally created in the British Columbian interior by two passionate hash advocates, Embark is now expanding production capacity to keep up with surging demand.
The Hank Hash – High quality, accessible concentrates
Crafted by Marcus Richardson, an internationally recognized figure in the cannabis industry, The Hank line of concentrates is formulated to cater to a dedicated and passionate customer base. Mr. Richardson’s substantial marketing reach has also generated significant demand for licensing and partnership agreements by international partners for the Embark line of products.
Meridian Co. – Topicals infused with proprietary pharmaceutical delivery technology
Another first-of-its-kind product, the Meridian topical line integrates delivery technology that allows active ingredients to pass through dermal layers and allows for a true systemic absorption of cannabinoids. The delivery technology is not limited to cannabinoids but has broad applications for other drugs and APIs within the health and wellness and pharmaceutical markets.
ProteinQuest – Hemp seed derived protein powders, oils, and beverages through novel techniques
These techniques deliver a unique powdery white protein and golden oil with the key benefits of hemp seed but without many of the drawbacks.

¹Unaudited

The Transaction

The Agreement is among Embark Health Inc., an arm’s length privately held corporation, 1323977 B.C. Ltd. (“Subco”), a wholly-owned subsidiary of BevCanna, Bruce Dawson-Scully, in his capacity as shareholder representative and not in his personal capacity, and certain shareholders of Embark, pursuant to which BevCanna will acquire all of the issued and outstanding securities of Embark (each an, “Embark Security”) by way of a three-cornered amalgamation (the “Transaction”). Upon completion of the Transaction, Embark will become a wholly-owned subsidiary of BevCanna.

Pursuant to the Agreement, BevCanna will acquire all of the issued and outstanding Embark Securities by way of a “three-cornered” amalgamation (the “Amalgamation”) whereby Subco, a wholly-owned subsidiary of BevCanna, and Embark shall amalgamate pursuant to the provisions of the Business Corporations Act (British Columbia) to form one corporation, which shall continue under the name “Embark Health Inc.”, as a wholly owned subsidiary of BevCanna.

Pursuant to the Amalgamation, on closing of the Transaction (“Closing”), BevCanna will, subject to customary closing adjustments, issue to holders (each, a “Embark Shareholder”) of common shares of Embark (each an “Embark Share”) an aggregate of 46,666,666 common shares of BevCanna (each a “BevCanna Share”, and such BevCanna Shares issued as consideration for the Transaction, the “Consideration Shares”) issued at a deemed price of $0.45 per share, equivalent to aggregate consideration of $21,000,000. The deemed price represents a 33% premium to the volume weighted average trading price of the BevCanna Shares on the CSE for the five trading days preceding the date of this announcement of approximately $0.34 per share. In addition to the Consideration Shares, the Amalgamation provides for the issuance of preferred shares of BevCanna to each Embark Shareholder which entitle the holders to receive earn-out payments of an aggregate of up to $9,199,442, contingent upon Embark achieving up to $92,178,280 EBITDA over the first three completed financial years following the Closing. The Consideration Shares will be subject to voluntary resale restrictions, with 1/12^th of the Consideration Shares being released from the resale restriction on the last day of each month following Closing for a period of one year. The earn-out payments will be made by the issuance of BevCanna Shares pursuant to conversion of the preferred shares (at a rate equal to the then current 5-day VWAP), redemption of preferred shares for cash, or a combination of both conversion and redemption, at BevCanna’s sole discretion. The Agreement also provides for a post-closing price adjustment pursuant to which the net proceeds from the disposition of Embark’s facility in Woodstock Ontario will be distributed to Embark Shareholders if such disposition occurs within 18 months of Closing.

Completion of the Transaction remains subject to, among other things: approval of the Canadian Securities Exchange (the “CSE”); shareholder approval by Embark; and other conditions which are customary for transactions of this nature.

All BevCanna Shares to be issued in the Transaction will be issued pursuant to an exemption from applicable securities laws. There will be no finder’s fees paid in connection with the Transaction.

This news release does not constitute an offer to sell or a solicitation of an offer to buy the securities described herein in the United States. The securities described herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Act”), or any state securities laws and may not be offered or sold in the United States or to the account or benefit of a U.S. person absent an exemption from the registration requirements of such Act.

About Embark Health Inc.

Embark Health Inc.is a leader in solventless cannabis extraction and enhanced delivery technology, with a focus on the formulation and production of advanced 2.0 products for the B2B, medical, and adult-use markets. Embark continues to be at the forefront of production of concentrate products, including bubble hash, traditional pressed hash, rosin, dry sift and the top-selling Hazel Hash Stick. Embark has also brought best-in-class drink mixes with rapid onset and enhanced bioavailability to market, as well as the market’s first topical product with true systemic absorption of cannabinoids. Embark products are currently sold in BC, Alberta, Saskatchewan, Manitoba and Ontario.

Embark’s 40,000 sq ft Delta, BC-based facility is fully licensed for the production of concentrates, beverages, edibles and topicals. Embark’s medical sales license and research license bolster the innovative ecosystem attracting third-party brands and white label clients.

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